The MGT Construction bankruptcy case is nearing the end. (BizSense file)
The MGT Construction bankruptcy saga will soon be put to rest — and there are at least some scraps leftover for the defunct firm’s remaining creditors.
The trustee overseeing MGT’s Chapter 7 liquidation last month filed his final report with the bankruptcy court, meaning the case is reaching its conclusion after recovering all the assets that were out there to be found.
Since the former Thalhimer construction arm collapsed in the face of an accounting scheme in February 2018, seasoned trustee Harry Shaia and a legal team ultimately recovered $1.64 million for MGT’s final 115 or so creditors owed a combined $9.25 million.
After paying nearly $700,000 in administrative expenses to lawyers, accountants and the like, that leaves $952,000 in the estate to be disbursed to creditors, equal to about 9 cents on the dollar of what they’re owed.
The biggest batch of cash collected by the estate came from $1.5 million in insurance proceeds from a policy held by Thalhimer. Shaia’s camp and Thalhimer settled on that figure after mediation last year. Of that total, $800,000 was paid by the insurance company, while the remaining $700,000 was paid directly by Thalhimer.
Thalhimer was one of the construction firm’s two largest creditors along with insurance giant Hartford. Thalhimer said it was owed at least $15 million, money it said it spent to prop up the flailing construction business after the fraud was discovered internally.
The settlement with Shaia involved Thalhimer and Hartford dropping its claims and included provisions preventing the trustee from pursuing any future civil claims against Thalhimer and any former MGT employees or directors.
The biggest remaining creditors include mostly construction contractors that did work on various MGT jobs, as well as at least one of MGT’s developer clients.
Among the largest debts owed to vendors, Evans Carpet Corp., owed $465,000, will get $44,000.
Among MGT’s former developer clients, entities tied to locally-based Genesis Properties, owed a combined $3.18 million, will get $302,000.
An entity related to the developer of East End Village, a disputed project that MGT worked on in Tulsa, Oklahoma, will get $213,000 for its $2.5 million owed.
Among the administrative expenses was $500,000 to law firm Offit Kurman, which Shaia hired as special counsel last year to pursue claims. Richmond law firm Kepley Broscious & Biggs, led in this case by Bill Broscious, earned $130,000 for representing Shaia.
Shaia requested $72,000 for his services.
The deadline for filing claims was last November. The MGT case is expected to be fully finalized before year’s end. Creditors do have 21 days to object to the trustee’s final report.
While less than 10 cents on the dollar may seem on paper a small consolation, Jonathan Grasso, an attorney with law firm Pierce McCoy who represented a handful of MGT creditors, said something is better than nothing.
“With any Chapter 7 case you don’t go into it expecting a particularly large distribution. Even though it’s only 9-and-a-half cents, that’s more than you see in a lot of Chapter 7 scenarios,” Grasso said. “I thought counsel for the trustee and the trustee did a great job.”
“And our clients are happy to see at least something being returned. Would they have loved to have seen more? Of course.”
Grasso also said there’s another sort of victory for some of these creditors.
“A lot of our clients were very happy more with the moral victory of seeing one of the (former MGT) employees pleading guilty to federal charges.”
That’s a reference to Patrick Lindsey, who worked the books at MGT before pleading guilty last year for his part in the accounting scheme. He pleaded guilty to one felony count of conspiracy to commit wire fraud and bank fraud and is scheduled to be sentenced Jan. 6.
To date, Lindsey is the only former MGT employee to have been charged in the matter. The resolution of the bankruptcy case does not prevent further criminal charges from being filed.
The MGT Construction bankruptcy case is nearing the end. (BizSense file)
The MGT Construction bankruptcy saga will soon be put to rest — and there are at least some scraps leftover for the defunct firm’s remaining creditors.
The trustee overseeing MGT’s Chapter 7 liquidation last month filed his final report with the bankruptcy court, meaning the case is reaching its conclusion after recovering all the assets that were out there to be found.
Since the former Thalhimer construction arm collapsed in the face of an accounting scheme in February 2018, seasoned trustee Harry Shaia and a legal team ultimately recovered $1.64 million for MGT’s final 115 or so creditors owed a combined $9.25 million.
After paying nearly $700,000 in administrative expenses to lawyers, accountants and the like, that leaves $952,000 in the estate to be disbursed to creditors, equal to about 9 cents on the dollar of what they’re owed.
The biggest batch of cash collected by the estate came from $1.5 million in insurance proceeds from a policy held by Thalhimer. Shaia’s camp and Thalhimer settled on that figure after mediation last year. Of that total, $800,000 was paid by the insurance company, while the remaining $700,000 was paid directly by Thalhimer.
Thalhimer was one of the construction firm’s two largest creditors along with insurance giant Hartford. Thalhimer said it was owed at least $15 million, money it said it spent to prop up the flailing construction business after the fraud was discovered internally.
The settlement with Shaia involved Thalhimer and Hartford dropping its claims and included provisions preventing the trustee from pursuing any future civil claims against Thalhimer and any former MGT employees or directors.
The biggest remaining creditors include mostly construction contractors that did work on various MGT jobs, as well as at least one of MGT’s developer clients.
Among the largest debts owed to vendors, Evans Carpet Corp., owed $465,000, will get $44,000.
Among MGT’s former developer clients, entities tied to locally-based Genesis Properties, owed a combined $3.18 million, will get $302,000.
An entity related to the developer of East End Village, a disputed project that MGT worked on in Tulsa, Oklahoma, will get $213,000 for its $2.5 million owed.
Among the administrative expenses was $500,000 to law firm Offit Kurman, which Shaia hired as special counsel last year to pursue claims. Richmond law firm Kepley Broscious & Biggs, led in this case by Bill Broscious, earned $130,000 for representing Shaia.
Shaia requested $72,000 for his services.
The deadline for filing claims was last November. The MGT case is expected to be fully finalized before year’s end. Creditors do have 21 days to object to the trustee’s final report.
While less than 10 cents on the dollar may seem on paper a small consolation, Jonathan Grasso, an attorney with law firm Pierce McCoy who represented a handful of MGT creditors, said something is better than nothing.
“With any Chapter 7 case you don’t go into it expecting a particularly large distribution. Even though it’s only 9-and-a-half cents, that’s more than you see in a lot of Chapter 7 scenarios,” Grasso said. “I thought counsel for the trustee and the trustee did a great job.”
“And our clients are happy to see at least something being returned. Would they have loved to have seen more? Of course.”
Grasso also said there’s another sort of victory for some of these creditors.
“A lot of our clients were very happy more with the moral victory of seeing one of the (former MGT) employees pleading guilty to federal charges.”
That’s a reference to Patrick Lindsey, who worked the books at MGT before pleading guilty last year for his part in the accounting scheme. He pleaded guilty to one felony count of conspiracy to commit wire fraud and bank fraud and is scheduled to be sentenced Jan. 6.
To date, Lindsey is the only former MGT employee to have been charged in the matter. The resolution of the bankruptcy case does not prevent further criminal charges from being filed.
9% on unsecured claims is a stellar result for a Ch. 7 debtor whose assets were a drop in the bucket compared to its liabilities. The key settlement provision was getting Thalhimer and Hartford to drop their claims against MGT, who together had around 80% of initial unsecured claims.